Uganda: Fighting Illicit Trade

When Jonathan D'Souza, the British American Tobacco managing director, was travelling from Fort Portal to Kyenjojo last year, he made a stop-over at a drinking joint on the high way. He picked interest in a bottle of Johnnie Walker, a middle class whisky. But on looking at the bottle critically, he noticed that the 'n' in Johnnie Walker was missing. Also, he realised that the company's trade mark picture of a walking man was also missing.

"I did not even bother to buy the drink," he said. "I knew the product was a [counterfeit]." Of course many others were not as lucky.

In remarks at the official launch of the Prosecutors Manual on Illicit Trade in Uganda on Jan. 29, D'Souza was one of the private sector players who urged the government to take tougher action against illicit trade because it was dangerous to genuine businesses, consumers and the economy. Illicit trade is a form of trade that infringes the rules, laws, regulations, licenses, taxation systems, embargos, and all procedures that countries use to organise trade, protect citizens, raise standards of living and enforce codes of ethics.

In recent years, illicit trade has been booming - a situation that has forced the various stakeholders to take some action. The goods on high demand by illicit traders include electronics, food stuffs, cigarettes, alcohol among others.

Unfortunately, the government has not put in place tangible laws outlining tough penalties to culprits. Instead, simple punishments and fines are awarded to those convicted - which of course is pocket change for people who earn billions from the vice.

First steps:

The business community says the vice has to be fought on two fronts - the punitive whereby the culprits are punished severely as a deterrent and preventive whereby the temptation to engage in illicit trade is minimised. Though the laws are weak, it has also been argued that prosecutors are not empowered appropriately to bring the culprits to justice. On Jan. 29, the Director of Public Prosecutions (DPP), Richard Buteera, launched the Prosecutors Manual on Illicit Trade in Uganda with the aim of providing prosecutors with first hand information on illicit trade, what it is, what it involves and the various forms that it takes.

The 77-page manual highlights the legislative regime in Uganda, highlighting the key offenses under various legislations that a prosecutor dealing with illicit trade should be aware of. It also includes a guide to key principles of criminal law and trail procedure to be taken into consideration throughout the stages of investigation and the court trial process, up to sentencing.

Some of the relevant legislation, which the manual looks at include; the Penal Code Act Cap, 120, The Copyright and Neighboring Rights Act 2006, the East African Community Customs Management Act 2004, the Income Tax Act, the Weights and Measures Act among others.

Although these legislations exist, Buteera admitted that they cannot subject culprits to punishments that match the magnitude of the crimes. Though the manual is not a law in itself; it is to help on how to improve on the application of the existing laws, despite the inherent weaknesses some of which Buteera highlighted.

"The criminalisation of illicit trade is inadequate with some forms of the trade being classified as misdemeanors," he noted, adding that perpetrators therefore opt for the minor punishments under the law and are able to get away only with a "slap" on the wrist when apprehended.

The preventive lapses that are causing the vice to flourish are the weak border controls, the limited number of law enforcement personnel to monitor all entry border points into Uganda, among others.

Buteera said the vice is flourshing partly because it is highly profitable, there is lack of a clear, legal framework at national level and the absence of a common regional policy on illicit trade.

As a result, the trade has undermined the concept of a free and open market place which is fundamental to improving competitiveness, increasing investment, generating jobs and improving the economic situation in the country. Officials said some of the products under this form of trade were a hazard to consumers as some could be expired and sold cheaply.

Indeed, Buteera was not sure if the guidelines would provide practical solutions to the problem, but suggested that they were in the process of giving proposals to Parliament on how some of anti-illicit trade laws can be strengthened.

"Illicit trade is a bigger problem. This is step one," he said, adding that the Directorate of Public Prosecutions was involving all stakeholders like the Police, the private sector, the traders, the URA, UNBS and the general public to fight the vice.

Private sector demands:

As expected, the private sector players and traders were not positive either as regards the effectiveness of the guidelines in curbing the vice. "We need a specific law in place to punish the culprits," said Gideon Badagawa, the Private Sector Foundation Uganda (PSFU) executive director. He said the issue of the guidelines on the trade was good but what is needed is an effective legal framework. "We have been demanding for this for years but nothing is being done," he said. He recommended that the traders' and manufacturers' associations should have codes of conduct that sanction any of their members who engage in illicit trade.

Ben Manyindo, the Uganda National Bureau of Standards executive director, was positive about the guidelines but suggested that fighting illicit trade requires a lot more than effective prosecution.

"The issues of illicit trade are complex," he said. "You many strengthen your presence at the border when actually some of these goods are from within."

He said there was a need to put in place strict laws like the anti-counterfeiting law, which is still before Parliament to deal with the victims.

Bodies like UNBS, which should have played a preventive role, have inadequate capacity in terms of resources and personnel, which makes it difficult to man all the border points and to monitor the standards across the country. Despite the severe lack of capacity, Manyindo said UNBS confiscates illicit goods worth over Shs 5 billion per year, which means it would be even more effective if it had the requisite capacity.

Everest Kayondo, the chairperson of Kampala City Traders Association, was forced to respond to criticisms that their members are the biggest culprits of the vice. Kayondo said they urge their members to deal in genuine products and to adhere to good methods of conducting business, though he did not mention what punishment they mete out to their members who fall short of these standards.

The losses

D'Souza said thanks to illegal dealers in the tobacco industry (those selling smuggled cigarettes), their sales reduced last year and that URA was losing over Shs 150 million per week because of the reduced sales.

URA figures indicate that for the period from July to December 2012, the enforcement division registered a total of 1, 958 seizures of smuggled goods, which were intercepted at both customs gazetted and non- gazetted points. The goods were worth Shs 8bn. The revenue body is said to register an average of 300 seizures on a monthly basis - a clear indication that the punitive and preventive measures are not working. In other countries, culprits not only lose the illicit goods but also pay a hefty fine and serve a long jail term.

Peter Mulisa, URA's manager for prosecution and legal services, said culprits in Uganda should lose all the goods plus the carrier to the State on top of fines. However, others said many of the culprits walk off Scott-free because of corruption, a weak investigative machinery and ineffective prosecution - a situation that private sector players said was making Uganda an unattractive investment destination in comparison to our regional counterparts.

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